Home Capital Tong's Portfolio

Interest waiver on loans … who does it really help?

Asia Analytica
Asia Analytica9/23/2021 3:41 PM GMT+08  • 9 min read
Interest waiver on loans … who does it really help?
In summary, the call for an interest waiver is short-sighted and irrational, both economically and mathematically speaking.
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

Malaysian banks are being pressured to waive three months of interest on personal loans for those in the B50 category (bottom 50% income group) who have opted for the second round of loan moratorium. When news of this latest measure broke the previous week, it was met with diverging reactions — for those expected to benefit, it was a positive surprise but, for banks and their investors, it was understandably negative.

We fully appreciate that the B50 needs more help, as they are disproportionately affected by the pandemic in terms of loss of jobs and incomes, owing to the economic shutdown. Let us be honest, though; the interest waiver is a populist move — it gives the impression of helping millions of lower-income households and, in the process, earning some political brownie points. But make no mistake, this action comes at a very high price — the cost of the fallout will be far higher than the gains achieved.

For starters, it will cast doubt on the integrity of contracts and, once a precedence is set, whether such similar requests will not be repeated in the future. For that matter, will the interest waiver be extended beyond three months? There are now calls to expand the waiver to include small and medium enterprises. Where does it end?

For more insights on corporate trends...
Sign In or Create an account to access our premium content.
Subscription Entitlements:
Less than $9 per month
Unlimited access to latest and premium articles
3 Simultaneous logins across all devices
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.